Companies Are Moving Toward CRM As A Service

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December 01, 2004 (5:15 PM EST)

Managing customer and sales data through software that's offered as a service is increasing in popularity, as companies look to simplify their information technology systems by placing the responsibility for maintenance on vendors, a market-research firm said.

A study of 14 vendors of so-called customer relationship management (CRM) software found, in general, that companies providing CRM as a hosted service had higher levels of customer satisfaction than vendors whose main business was in licensing software, Info-Tech Research Group said.

"On-demand software is becoming an appealing idea for so many companies that [the trend] can't be overlooked," Info-Tech analyst Janet White said. "A decade from now, on-demand will be the de facto, and licensing will be less likely, except for a minority of companies."

The trend was demonstrated in the study's customer-satisfaction survey for the leading vendors in both categories, White said.

The poll found that for software makers Oracle Corp. and Siebel Systems Inc., 67 percent and 64 percent, respectively, of their customers were either very satisfied or satisfied with their vendor's products. But for Best Software and Salesforce.com Inc., which provide CRM only as a service, 90 percent and 100 percent of their customers, respectively, said the same.

Info-Tech expects the strong customer satisfaction in the latter group to help drive CRM as a service into larger companies. Today, mostly small and medium-size companies use the service, but Info-Tech expects the market to move upstream quickly to large mid-size companies.

For the near future, however, large enterprises are expected to hold on to their licensed CRM software to get the most out of the millions of dollars spent on deployment and consultants, and on the hiring of technicians to maintain the systems, White said.

In time, however, White expects even the largest of companies to migrate to CRM services as the technology matures, particularly in its ability to integrate with complex enterprise resource planning (ERP) applications used to run business operations and supply-chain management systems.

The attraction of lowering IT maintenance costs and avoiding the high costs of licensing, deployment, and consultants will be too great for most companies to ignore, White said. Other software segments, such as ERP, are also expected to eventually become more popular as a service than as licensed technology.

"If you can load [maintenance] on a vendor, then it becomes their problem," White said.